Matthew Callaghan, joint administrator and PwC partner, said: "The Palmer & Harvey name has been a trusted partner for retailers and suppliers for nearly 100 years. This is a devastating blow for everyone who has been involved in the business.

"The administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks."

Attempts to restructure the business had been unsuccessful, PwC said. Around 2,500 people at the company's head office and throughout the branch network have already been made redundant.

The cigarette wholesaler, which employs 4,000 people and supplies tobacco products to Tesco and other major retailers, had been hit by a working capital issue, sources said, but insiders argued the company still hoped it would salvage a rescue deal.

P&H and Carlyle began exclusive talks last month and were expected to announce a deal.

The collapse of P&H could cause thousands of jobs losses and break down some parts of the grocery retail industry during the key Christmas trading period. Tobacco firms have reportedly lined up contingency plans to deal with the collapse of P&H.

P&H and PwC declined to comment. Carlyle Group did not immediately respond to a request for comment.